Compagnie Financière de Neufcour S.A. (EBR:NEU): Time For A Financial Health Check
Investors are always looking for growth in small-cap stocks like Compagnie Financière de Neufcour S.A. (EBR:NEU), with a market cap of €2.8m. However, an important fact which most ignore is: how financially healthy is the business? Given that NEU is not presently profitable, it’s vital to assess the current state of its operations and pathway to profitability. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, given that I have not delve into the company-specifics, I’d encourage you to dig deeper yourself into NEU here.
How much cash does NEU generate through its operations?
Over the past year, NEU has ramped up its debt from €520k to €740k – this includes long-term debt. With this rise in debt, the current cash and short-term investment levels stands at €287k for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of NEU’s operating efficiency ratios such as ROA here.
Can NEU meet its short-term obligations with the cash in hand?
Looking at NEU’s €1.5m in current liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.96x. For Real Estate companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Is NEU’s debt level acceptable?
With a debt-to-equity ratio of 17%, NEU’s debt level may be seen as prudent. NEU is not taking on too much debt commitment, which may be constraining for future growth. NEU’s risk around capital structure is low, and the company has the headroom and ability to raise debt should it need to in the future.
Next Steps:
NEU’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. In addition to this, the company will be able to pay all of its upcoming liabilities from its current short-term assets. I admit this is a fairly basic analysis for NEU’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Compagnie Financière de Neufcour to get a more holistic view of the stock by looking at:
Historical Performance: What has NEU’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
